A federal appeals court has ruled that Wal-Mart’s investors did not have the right to challenge the company’s sales policies on guns and any other item shareholders may think socially offensive, slapping down a previous ruling from a judge appointed by President Obama.
Unless the Supreme Court agrees to hear the case, legal scholars agree that the ruling this week has killed, for now, Trinity Wall Street Church’s chances of meddling with Wal-Mart’s sales policies by buying shares of the firm and then asserting a right to change the company’s business rules and practices.
“Wal-Mart is safe now, except for going to the Supreme Court there’s really not much [Trinity] can do. It’s a possibility that they might try for a different shareholder proposal, they may try all over again with a differently worded proposal. But in regard to this one proposal, they are safe,” said Bernard Sharfman, an adjunct professor at George Mason University School of Business.
Gun rights advocates applauded the court’s decision to recognize the need for business decisions to be separated from the political agenda of company shareholders.
“We believe that was the correct decision by the court. It’s untenable for shareholders with a political agenda to be making business decisions for a company. If they don’t agree with the business decisions of the company, they can sell their shares,” said Larry Keane, senior vice president and general counsel for the National Shooting Sports Foundation.
The 3rd U.S. Circuit Court of Appeals ruling reversed a district court decision in November that would have let the company’s shareholders influence the store’s policy on high-capacity sporting rifles.
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“The Third Circuit reached the right decision in reversing the district court’s ruling,” Wal-Mart spokesman Randy Hargrove told The Washington Times. “We appreciate the court’s quick consideration of the issues.”
In a statement emailed to The Times, the Rev. Phillip Jackson, Trinity’s vicar, said that while the church was disappointed with the ruling and was still considering its legal options, it was pleased that the case drew attention to “an important issue of corporate governance and social responsibility.”
He said the church would “continue to challenge the management and boards of the companies in which we invest to make social responsibility a real and integral part of their corporate mission.”
The court’s decision came exactly one week after a panel of three judges heard oral arguments in the case between the Arkansas-based retailer and the church, which holds 3,500 shares in the company.
The court has not yet released its full opinion but made its decision public in time for Wal-Mart’s upcoming shareholder’s meeting on June 5.
After the 2012 shooting at Sandy Hook elementary school in Newtown, Connecticut, Trinity investors argued that the sale of high-capacity sporting rifles could hurt Wal-Mart’s family friendly image and could be economically harmful to investors.
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But gun sales experts say that taking the rifles off the shelves would have been a bigger financial blow to the company, despite the investors’ concerns.
“From our industry’s point of view there’s no reason why Wal-Mart shouldn’t sell modern sporting rifles. They are the most popular rifle being sold in the United States today and half the people who buy those are current or former law enforcement,” said Mr. Keane.
Michael Hammond, legislative counsel for Gun Owners of America said that Trinity would have a hard time getting the resolution past Wal-Mart’s investors.
“I doubt if there is a lot of deer hunting in the graveyard of the Trinity church, but there is a lot of hunting in Arkansas which is where a majority of the Walton heirs live,” said Mr. Hammond. “I suspect that the shareholders wouldn’t have sided with it in destroying the corporation for the sake of making a political point.”
Legal experts say that the rules governing business and shareholder operations are so broad that the ruling might have been different had the appeal been heard in a different circuit and thus courts may take up this issue again in the future.
“It doesn’t have tremendous precedent. It all comes down to how the courts view those broadly drafted SEC guidelines,” said Charles Elson, director of the Center for Corporate Governance at the University of Delaware.
• Kellan Howell can be reached at khowell@washingtontimes.com.
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